Santos, Kogas sign LNG offtake agreement

Rick WilkinsonOGJ Correspondent

MELBOURNE, Dec. 17 -- Santos Ltd., Adelaide, signed binding agreements with Korea Gas (Kogas) and Total SA that pave the way for a final investment decision on the Santos joint venture’s proposed $16 billion (Aus.) CSG-LNG plant in Gladstone, Queensland.

Santos agreed to sell to Kogas 3.5 million tonnes/year of LNG for 15 years from the project, with an option of an additional 5 years. The agreement provides for 1.7 million tpy to be delivered from Train 1 and 1.8 million tpy from Train 2.

Another 3.5 million tpy already has been committed for 20 years to Petronas—1.8 million tpy from Train 1 and 1.7 million tpy from Train 2.

The combined value of the offtake agreements is estimated at more than $120 billion.

Separately, Santos sold a total of 15% interest in the project itself to Total and Kogas for $665 million (Aus.).

In parallel with this, Santos’ foundation partner Petronas has agreed to sell a 7.5% interest in the project to Kogas.

After completion of the transactions, Gladstone LNG project ownership will be Santos 30%, Petronas 27.5%, Total 27.5%, and Kogas 15%.

The stage is now set for a final investment decision for the project by the end of January 2011.

The project involves development of coal seam gas resources in the Bowen and Surat basins of eastern Queensland, construction of a 420-km gas pipeline from the fields to Gladstone, and two LNG processing trains with a combined capacity of 7.8 million tpy.

First LNG shipments are now expected in 2015. Previous announcements have targeted 2014.